Press release

21 Apr 2020 Mumbai, IN

Indian PE/VC investments in 2020 projected to decline by 45%-60% due to Covid-19: EY report

Mumbai, 21 April 2020: On account of the Covid-19 global outbreak and stipulation of lockdowns and restrictions on travel and normal business activity, the economic trajectory of India has been significantly disrupted.

Press contact
EY India

Multidisciplinary professional services organization

Related topics Private equity
  • In 1Q2020, at US$5.1 billion, quarterly Indian PE/VC investments fell by over 50%, both y-o-y and sequentially
  • PIPE and growth capital strategies expected to lead the PE/VC recovery in 2020
  • Buyouts expected to remain muted, with activity picking up only at the end of 3Q2020 / beginning of 4Q2020 
  • PE/VC exits in 2020 projected to reduce considerably, ~ 50%-67% below 2019 levels
  • Funds expected to increase holding periods to sell assets in better times, which will impact Internal Rate of Returns (IRRs) negatively

Mumbai, 21 April 2020: On account of the Covid-19 global outbreak and stipulation of lockdowns and restrictions on travel and normal business activity, the economic trajectory of India has been significantly disrupted.  Indian PE/VC investments in 2020 to be ~US$19 billion to US$26 billion; a reduction of ~45% -60% from 2019 levels as per EY’s latest report titled, “COVID-19: projected impact on Indian PE/VC.”  PE/VC exits are also expected to reduce by 50%-67% % from 2019 levels, adds the study. Projecting how General Partners (GPs) will most likely react to the crisis in 2020, the study expects that GPs will give greater attention to the business continuity of their current portfolio companies, seek attractive private investment in public equity (PIPE) transactions and are also likely to favour growth capital investments and structured credit deals.

Impacted by COVID-19, PE/VC investments in 2020 are on a downward trajectory.  With March 2020 at US$818 million, monthly Indian PE/VC investments went below the US$1 billion mark for the first time in the last three years. Exits stand at US$1.1 billion in March largely due to a single large US$1 billion deal. Fund raising has gone cold with March 2020 recording just US$85 million in fund raises.

 Vivek Soni, Partner and National Leader for Private Equity Services, says,

“The COVID-19 pandemic has caused severe dislocations across markets, and with many countries under lockdown, economic activity has contracted significantly. The Indian government has extended the ‘lockdown’ to May 3 and has indicated its inclination to permit resumption of some economic activity under strict guidelines in ‘green’ zones.  However, there is still a lot of uncertainty around: 1) the future trajectory of COVID-19 in India, 2) a holistic understanding of its ramifications on the global and Indian economy; and 3) the near-term economic trajectory of the country. 

While these uncertainties may continue to remain for some more time, our hypothesis is that there will be a significant reduction in Indian PE/VC investment and exit activity in 2020 as compared to the preceding year.

Over the next two quarters, we expect more clarity to emerge on the spread/control of the epidemic, removal of restrictions, revival of demand and supply chains and government response by way of fiscal and policy stimulus. As our estimates are highly sensitive to the above, we will continue to monitor the situation and if required, recalibrate our outlook periodically.”

PEVC Investment activity

In 1Q2020, at US$5.1 billion, quarterly Indian PE/VC investments fell by over 50%, both y-o-y and sequentially. On a monthly basis, after a decent January (US$2.5 billion), investments fell significantly in Feb (US$1.7 billion) before hitting three year monthly low of US$818 million in March. Most of the deals that were announced in February and March were on the back of significant work done in the preceding 6-9 months.

Travel restrictions and lack of in-person meetings have significantly slowed down the deals that are in process. These deals will be revalued if not cancelled once the lockdown restrictions are lifted and more clarity emerges on future revenues, rebooting of supply chains, etc. On the whole, in 2020, we expect investors to price in the enhanced business risk by becoming more sceptical and stringent on due diligence and valuation of deals in process.

  • In the near-term, we expect most GPs to remain focused on their current portfolios, helping their company managements in ensuring business continuity and be in ‘wait and watch’ mode on new investment activity.
  • As clarity emerges, in the near-term, we expect PE/VC investors to do more private investment in public equity (PIPE) deals relative to what was done in 2019.
  • Growth capital strategy is expected to lead the charge and regain its historical position as the largest deal type by value (in 2019, buyouts had emerged as the largest deal type by value). The coming difficult times will give PE/VC funds the opportunity to deploy much needed capital at attractive terms with quality businesses and allow them to grow fast by capturing market share.
  • We expect GPs to go slow on buyouts till they fully understand the ramifications and the fall out of the pandemic crisis on the future business potential of their targets. Our projection is that buyout activity may be muted till the end of 3Q2020 / beginning of 4Q2020. We expect buyout deals to primarily emanate from conglomerates (that will look to carve out/divest non-core businesses).  Bolt-on acquisitions by existing portfolio companies of buyout funds is another theme that we expect to find favour in 2020.
  • Special situation funds and multi-strategy PE funds with private credit strategies are expected to find significant deal flow in 2020. Many quality businesses/owners of quality businesses are now expected to be open to raising what was historically seen as ‘expensive’ structured debt.  Relative to 2019, we project an increase in usage of convertible instruments by PE/VC investors.
  • Although start-up investments have shown resilience in 1Q2020, going ahead we expect the going to be tough, especially for early stage companies with nil revenue and those with negative unit economics and significant cash burn rates. 
  • Sectoral themes that we project to be the first to find favour with PE/VC investors include defensive sectors like technology, consumer goods (packaged essentials, personal and healthcare, food processing and retail), pharmaceuticals as well as sub-sectors like medical supply and services, biotech, agricultural products, edtech, chemicals and e-commerce.
  • Investment activity in key sectors like financial services and fintech, infrastructure and real estate, healthcare, non-essential consumer Goods and services (durables, apparel, mobility, restaurants) that till recently attracted significant amounts of PE/VC investments are expected to slow down and may take some time to find traction.

PEVC Exit activity

In 2019, PE/VC exits added up to US$11.1 billion, spread across open market exits (US$4.6 billion), secondary deals (US$2.5 billion), M&As (US$1.9 billion), buybacks (US$1.9 billion) and IPOs (US$0.25 billion). In 1Q2020, PEVC exits increased by 59% compared to 1Q2019 primarily due to the large US$1 billion offer for sale by PE investors in the SBI Cards IPO. However, compared to 4Q2020, exits have declined by 43%.

PE/VC exits in 2020 are expected to shrink considerably from 2019 levels, and as per our initial estimates, be 50%-67% lower than the 2019 level of ~US$11 billion. PE/VC funds are more likely to hold portfolio positions for longer, work through the crisis and sell in better times as opposed to selling at deeply discounted valuations. This may lead to significant increase in hold periods which shall impact Internal Rate of Returns (IRRs) negatively. Similar trends were also observed post the GFC.

PE/VC fundraising

Fundraising is expected to slow down materially as limited partners (LPs) rebalance their asset allocations and gravitate towards tried and tested GPs with track record of delivering returns to LPs across cycles. Nascent GPs, first time fund managers, and spin-offs may find it difficult to raise capital in this environment. Consolidation of the Indian PE/VC sector is expected to continue as GPs with multiple funds under their belt find better success at raising capital from LPs.


Note to Editors

About EY

EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit

This news release has been issued by EY Services Limited, a member of the global EY organization that also does not provide any services to clients.